FHA Home Loan Planning: Things You Should Know
Your plans for the home are just one aspect of the kinds of forward thinking you’ll need to do. Another aspect? Costs of the loan, from your down payment to closing costs. Yet another area is associated with choices you have to make when it’s time to decide which costs of the loan to pay upfront and what to consider financing.
Mortgage Loan Interest Rates: Fixed Rate or Adjustable Rate Mortgage?
Some borrowers are interested in FHA Adjustable Rate Mortgages instead of a fixed rate loan. This may be because the buyer already knows she won’t keep the home for the full term of the loan, or because interest rates are moving higher and the introductory rate may offset that higher rate temporarily.
When mortgage rates start to climb it may be wise to compare your options between fixed rate mortgages and adjustable rate or ARM loans. That said? Resist the temptation to look at the rates without taking into consideration issues like how long you think you may keep the home or how long until you refinance. You can make a more informed decision about ARM loans by doing so.
Remember that staying in the home long-term means that a fixed-rate mortgage could be the better choice.
FHA Mortgage Loan Fees and Closing Costs
Are you running the numbers on your projected down payment and closing expenses? Some borrowers overlook some important resources that can potentially lower those upfront costs.
In the planning stages of your home loan, be sure to research state and local down payment assistance programs. You can search your state government’s official site to see if there is a program near you.
Another resource for potentially lowering your upfront costs? Negotiating seller concessions up to six percent of the asking price of the home.
Seller concessions happen when you and the seller agree on the amount; if you are not comfortable with negotiating in this way, try an experiment. Do the math on a home you might be tempted to buy by calculating what six percent of the asking price might be.
See how much a little negotiation might save you if you talk to the seller. The dollar amount may convince some to give it a shot.
Some FHA Home Loan Closing Costs May Be Financed
If you don’t have an issue with a higher monthly payment as the result of financing certain closing costs, you can save more at the start of the mortgage--for example, by paying the Up Front Mortgage Insurance Premium in cash at closing time.
Every add-on to the loan amount potentially raises your mortgage payment. If you’ve decided to negotiate with your seller (see above) for seller concessions, you may be able to offset the Up Front Mortgage Insurance Premium if you choose to pay it in cash at closing time, but remember that you can only completely finance or completely pay off this premium. No partial financing or partial cash payments are allowed at closing time.
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